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3 Factors for Determining What to Sell on FBA

  • Mar 21, 2016 | Avalara

Imagine this scenario: You’re in one of your favorite store’s clearance sections, and you think you’ve found a great product that you can use in your business using Amazon’s Fulfillment by Amazon (FBA) program. You use the Amazon Seller App to scan the item, and find no other sellers! Hooray!

Or, is it really that great after all?

There is almost no end to the catalog of products that exist in Amazon’s database. You want to be sure you are making smart inventory purchases for your business, especially if you are buying in quantity. That involves knowing what you are looking at when you scan potential products. There are three key factors that you want to focus on: competition, rank, and category.

1. Competition

In the given scenario, the widget has no competitors. This is one thing that is potentially great, though it could also mean that someone else tried and it just wasn’t a great seller. So its lack on the site alone cannot help you decide it'll be a hit, but it can give you something to think about.

When checking competition, be sure to see if Amazon itself is a seller. Naturally, Amazon’s system is biased towards Amazon itself. They will likely have the Buy Box, and they can likely beat you on price, too. If the item in question has low margins and doesn’t seem to be a fast seller, it might be wise to pass.

If you're using FBA, you can essentially ignore any sellers that are using the Merchant Fulfilled (MF) option. When you sell via FBA, the edge you get is the benefit of Amazon Prime to your customers. Prime shoppers all but disregard MF products. Why would you pay for a Prime subscription if you didn’t always want to get the fast and free two-day shipping? The competition to focus on is Amazon, as mentioned before, or other sellers using FBA. Anyone else is not your competition.

2. Rank

This is perhaps the most important factor in your decision, or the one talked about the most when selling using FBA. Rank is the number that Amazon assigns an item, based on an algorithm, that basically tells you how popular the item is. However, this is assigned to items by category -- each category has items with their own ranks.

It is common to read that, if you want to have fast turnover in your FBA inventory, that you should focus on the top ten percent of items in a category. This can vary greatly, depending on the category you are looking at. For example, ten percent in a small category like baby goods is more than 100,000 products. But ten percent in a large category, like books, is more than 5,000,000 items. You want to look at the rank objectively depending on the category the item is in. For a book, you might get excited to see a 900,000 rank while you would not feel the same about that rank in the grocery category.

3. Category

The last of the three factors to consider is categories. Category can make or break an item, depending on how you sell or what is open to you in your account.

First, you want to familiarize yourself with the categories that are gated. The most common gated categories are grocery, health and beauty, but there are many others, including automotive, collectibles, and travel products. If you have a personal level FBA account, you cannot be approved to sell in these categories. If you have a professional-level FBA account, then you must go through the process to be approved.

Once you are granted approval, you can sell freely in those categories as you would in the open categories. However, if you are not approved, you will be blocked from listing items in those categories. In the given scenario, if the seller does not have a professional account and the item is a bottle of shampoo, the decision would have to be to pass -- that seller cannot sell in the health and beauty categories.

If you scan using the Amazon Seller App, the results will be marked “restricted” for any category you cannot sell in, or if the item happens to have variations that you are restricted from selling for other reasons.

Each of these three factors on its own gives you a tiny glimpse at the whole picture. You would not want to take any individual piece of advice and base all of your decisions off of just that -- you will likely be burned much more than you score. But when you take all three -- competition, rank and category -- and consider them all together, you can find some amazing products to sell.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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Avalara helps businesses of all sizes achieve compliance with transactional taxes, including VAT, sales and use, excise, communications, and other tax types through automation, education and support.